Why do remote US companies require working in the US?

Question

Many of the high-tech opportunities for remote work require that you are working in the US. Why?

I am a US citizen, and I lived in the US until I graduated university. I am now living abroad. I have impeccable English, fully understand US culture, and I am willing to work American hours. I obviously would be responsible for managing my tax burden with my home country, and if travel to the US were required periodically, I would need to work it out.

Why should I be automatically disqualified for not residing in the US, if the entire company is composed of remote workers?

As a side note, is there an outsourcing firm you could team up with, so that instead of hiring you directly, the US company you want to work for could pay the firm an hourly rate? This might make the legalities simpler, at least from the US company's perspective. — , Mar 28 '19 at 16:53
@LightnessRacesinOrbit I mean US companies, and I specifically mean US citizens living abroad. I will edit. — Shifra, Mar 30 '19 at 18:22
Essentially same question on Money: Working as a European self-employed for an USA company — hmakholm left over Monica, Mar 31 '19 at 09:59
"I obviously would be responsible for managing my tax burden with my home country" << This might be more complicated than you believe, and most likely your employer would also would be responsible for this. Taxes are paid both by the employer and the employee, and you can't just claim "don't worry, I'll handle all the tax bureaucracy myself" - that's simply not how it works. — Stef, Nov 18 '22 at 09:47

score 222 · Answer 1 · answered Mar 28 '19 at 13:51

Why do remote companies require working in the US?

Those companies are likely based in the US and don't want to deal with the legal and tax complexities of having employees who live in multiple countries. It is complicated enough for some companies to deal with employees from various states within the US. Also having employees from around the world will further complicate legalities to the point that many companies would rather not deal with it.

Comments are not for extended discussion; this conversation has been moved to chat. — , Apr 01 '19 at 12:46

score 113 · Answer 2 · edited Nov 17 '22 at 21:45

There are many potential reasons for a company to discriminate based upon your country.

Tax Reasons

Taxes can get very complex, very quickly. Even if your country allows you to take on all of the tax responsibilities, which is relatively uncommon, the company will have to spend money even getting an expert on your country's laws to confirm this. Otherwise, the company will have to comply with tax laws of the US, the state the company is in, and your country. In some cases, it might even cost the company more money to comply with the tax laws of your parent country than your salary. It is not even that uncommon for smaller US companies hiring remote workers that must be based out of only one state, because it is costly to even comply with multiple US state tax and benefit rules.

This also raises issues with tax incentives that might be offered by the either the US federal or state governments. Some locations might provide tax breaks for employing local citizens.

Labor Laws

Labor laws vary even between different states, and vary drastically between different countries. There is a lot of cost involved with even identifying all of company's responsibilities to you—let alone complying with all of the applicable labor laws. How many days off a year do I have to give you? If you have a child, do I lose you as an employee for 6 months, but still have to pay you? What am I allowed to do with your employee data, and how am I required to store it?

Technology & Export Laws

There are laws that restrict the flow of technology from the US. Take for example, encryption export laws—although these have been greatly relaxed in recent years, there are still restrictions on what encryption algorithms are allowed to be used in products sold to a non-US country. This also leaves the potential for gray areas—it can be difficult to determine the legality of having someone who lives in country A working on technology X. In some cases, this could either be very expensive to figure out & keep track of, or the law might be ambiguous enough that it is easier to simply not have to worry about this becoming an issue at all.

Intellectual Property Concerns

Countries tend to have different laws dealing with IP, and some countries are known to ignore IP claims of other countries if doing so has the potential to benefit them (as an example, look at claims of IP theft in China for the last few years). It is potentially easier to protect your company's IP if both you and your employees are following the same rules. Also, if an employee steals a company's IP in the US, there is a clear path for the company to take legal action against that employee.

Marketing

Due to how many jobs have left the US to go overseas, it can be useful for marketing if companies are able to say that their products are fully made in the US, or that they only employ US citizens.

Government Contracts

Within the US, there are multiple levels of government, all of which have their own rules on who they allow to bid on and win contracts for government work. Government work is usually one of the most stable, and sometimes the most lucrative, sources of revenue for a lot of these companies. For example, if your US company has foreign-based employees, and is fulfilling a contract for the US Department of Defense, your US-based employees might not even be able to talk to non-US-based employees without extensively documenting every time they have a conversation. There might also be state or lower governments who require or give preference to companies who are employing people who work in their districts (in an attempt to keep taxes and jobs as local as possible).

Security

Companies will generally want to vet that you are who you say you are, that you are not a criminal, and that you do not partake in illicit drugs. They will usually already have a partnership or contract with a company who can perform background checks on you. In the US, it is not uncommon for even retail style jobs to require you to undergo a background check and drug screening. If you are not US-based, the company might not be able to get a reliable, accurate background check done, or might not want to spend the time and money it will cost to find a company in your location to complete it.

This also concerns cyber security. Depending upon the security controls for a given company, they might not feel comfortable allowing VPN access to their internal network from a foreign country, or they might not want to face increased risk of the data you might have stored becoming compromised.

Conclusion

The US is a large country, and has a lot of highly skilled individuals. There are not too many remote jobs where it would not be possible to find a US worker who is able to complete that work. Given that it almost always possible to find a US-based worker to fulfill a role, and all of the potential pitfalls listed above when hiring a foreign worker, it makes sense that non-international US-based companies would primarily hire US-based workers.

Could be a social aspect too. As in, "let's support homegrown talent first and foremost" (more fundamentally than the ensuing marketing benefits) — Lightness Races in Orbit, Mar 29 '19 at 15:26
Healthcare. Most countries don't charge citizens for their healthcare, they have some way of recovering it from the employers. That would get weird. — Harper - Reinstate Monica, Mar 29 '19 at 22:52
@Harper: "They have some way of recovering it from employers" falls under "Tax". — Ben Voigt, Mar 30 '19 at 05:37
Working in one country while living in another is still not a common practice, so there aren't any clear, simple, universal standards or contracts between countries how this should actually work. Since the burden is on the companies to "make it work" they prefer to skip that problem alltogether by just not hiring people who do not wish to move to the state in which the company operates. — Chapz, Nov 18 '22 at 09:37
@BenVoigt Yes and no. If I am hospitalised for a job-related injury, the hospital will ask me for signed papers from my employer, and will then recover its fee from my employer's insurance. It's not taxes, it's insurance. And I think it's possible to argue that an injury is work-related even when working from home on a computer. — Stef, Nov 18 '22 at 10:02
@Stef: That's a hospital recovering costs from the employer. I was responding to a comment about "Most countries", that is, the government(s) of said country(ies), recovering costs. When a government is involved, it is a tax. — Ben Voigt, Nov 18 '22 at 15:14
@BenVoigt "When a government is involved, it is a tax." I suppose you could define "tax" that way but I don't think I've seen such a definition anyplace else. Note that if I go to the hospital, then they send me the hospital bill, and then I fail to pay within reasonable time, then at some point the hospital is going to transfer the matter to the state, and the state is going to recover the costs from me. Does it become a tax at this point? It doesn't sound like it. It's just paying a bill (plus a fine for being late, probably). — Stef, Nov 21 '22 at 09:02
Linguistic quibble: I would say "distinguish" rather than "discriminate". While the denotation is the same, the connotations are different. — keshlam, May 29 '23 at 13:22
@BenVoigt It's not tax, it's insurance. A mandatory one. Just like mandatory car insurance - it's not a tax, even though it's the government who requires it. Dunno how in English, here we call them together "public tributes", in the meaning of "things the state unilaterally requires you to provide under threat of force". Tax is a tribute, but not all tributes are tax. Like car insurance, health insurance, pension plan, etc. But also non-monetary ones like military service. You wouldn't call the draft a tax, would you? — Agent_L, May 30 '23 at 15:15
@Agent_L: It is not insurance, nor even like insurance. Insurance is a contract I have with a private company. I can shop around and choose what coverage I want. The government enforces a car insurance mandate but is not the counterparty. By "draft" do you mean the selective service registration? Because there currently is no draft in the USA, and if it returns, that would be slavery under the color of law. Other countries do have a draft into public (not necessarily military) service, but presumably it's permitted under their constitution and immigrants knew what they were in for. — Ben Voigt, May 30 '23 at 15:24
@BenVoigt State healthcare is in fact a contract: between you who pays and the state to provide you the healthcare. Insurance doesn't imply you can shop around. If your insurer has closed list of approved garages, you can fix your car there or call it a loss. In most countries the list of allowed car insurers is closed and controlled by the state. The fact that in e.g. Poland the list of state healthcare providers is 1 changes nothing. I know that there is no draft in USA, but we're talking about non-USA countries. E.g. South Korea. Military or not, it's over a year of one's life to the state — Agent_L, May 30 '23 at 15:35
@Agent_L: That the state is the counterparty is important. That together with a mandate = tax. — Ben Voigt, May 30 '23 at 15:38
I work for a company which allows remote work from other countries. But only if we already have an office in that country. Otherwise, it's just too much of a hassle to set things up, mostly due to tax reasons, labor laws (which includes contracts between the employee and employer) and insurance. — Abigail, Jun 02 '23 at 19:46

score 11 · Answer 3 · answered Mar 28 '19 at 14:10

11

As a permanent employee, your employer will have tax and social security costs related to you, which would be complicated by your being in a different country.

Your employer would not necessarily know what these implications are, and there is no incentive for them to find out; they can generally get an equivalently qualified employee in the USA. The easy solution for them is to just recruit within the US, and preferably within the state where they are based.

answered Mar 28 '19 at 14:10

PeteCon

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The right way to handle these relationships is to have the foreign employee set up a self-employed legal business entity. Then there's absolutely no complications, you just pay a foreign business for their services. – JonathanReez Mar 28 '19 at 19:12
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@JonathanReez but at that point, do you "employ the non-US citizen", or do you just do business with an overseas company? – Patrice Mar 28 '19 at 19:56
@Patrice exactly, which is why its the way to go – JonathanReez Mar 28 '19 at 19:57
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@JonathanReez Except that then you have to figure out the legal framework under which you'll deal with this foreign entity. And deal with the risk that comes with the difficulty of taking legal action in a foreign country. And the risk that the tax authorities will say, "So, er, that person who works for a single-employee corporation, and who spends 100% of their time working for you, under your day-to-day direction and management? That's a sham and we consider them to be your empoyee." – David Richerby Mar 28 '19 at 21:06
@DavidRicherby at least in Czech Republic it is 100% legal to be self employed for a foreign corporation with no local legal entities. But of course many companies would rather not bother researching the legal facts and just prefer to hire American residents. – JonathanReez Mar 28 '19 at 21:12
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@JonathanReez My point is that the legal agreements you need with an incorporated contractor are different to the ones you need with an employee. So you need (expensive) lawyer time to draw up those agreements. If the *cough* employee breaches those agreements, suing them in a foreign country is difficult and expensive. And classing somebody who is functionally an employee (works 100% for you and is under your day-to-day management) as an external contractor is a form of tax evasion that tax authorities are well aware of and often pursue. – David Richerby Mar 28 '19 at 21:25
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So setting up this arrangement as hiring an incorporated contractor might be the "best" way of employing somebody in a foreign country, but it's still a lot more hassle than hiring somebody domestically. – David Richerby Mar 28 '19 at 21:27
@DavidRicherby usually this can be justified in case said employee is willing to work for a lower wage than a local resident. Even the most expensive lawyer won't charge you more than $10k to get the full facts on employment/self-employment laws in a given country. So its more of an unwillingness to deal with the unknown that a lack of business incentive. Source: knowing numerous people who live in Europe but work for the US. – JonathanReez Mar 28 '19 at 21:45

score 0 · Answer 4 · answered May 29 '23 at 16:09

If the company has offices in your current country, then some of the financial complications might be able to be managed by having you be hired there and put on assignment to work with the US group. For example, I spent years employed by the US part of the company while working with folks in Canada.

The other concerns voiced in other answers may be harder to work around.

You can always apply. If you're truly an outstanding candidate, the company may be able and willing to find ways to make it work. But you are presenting them with additional costs/difficulties, and you need to be sufficiently better to justify those.

Choice of where to live and where to work always has tradeoffs; this challenge is one you have selected. You know what the alternatives are.